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Risk Graphic - Harvard Business Review Article

Article – Should Direct Sellers Get Proactive About Risk?

Great article from the Harvard Business Review on how risk should be integrated in a company’s day-to-day operation rather than as a side function. According to the article:

“Following a crisis, regulators and managers naturally take steps to prevent a recurrence. In 2002, after Enron and WorldCom succumbed to massive accounting fraud, U.S. legislators passed the Sarbanes-Oxley Act, which gave directors and executives new oversight responsibilities. In the wake of the 2008 financial crisis many large banks changed their business models, and other companies implemented systems to better manage credit risks or eliminate over-reliance on mathematical models.

But there’s a problem with managing risk retrospectively: It’s a variation on what military historians call “fighting the last war.” As memories of the recession fade, leaders worry that risk management policies are impeding growth and profits without much gain. “Firms are questioning whether the models they put in place after the financial crisis are working—and more fundamentally questioning the role of risk management in their organizations,” says Matt Shinkman of CEB, a Washington-based firm that researches and disseminates best practices among its 10,000 member companies.

New research from CEB highlights the concern. Fully 60% of the corporate strategy officers surveyed said that their company’s decision-making process is too slow, in part because of an excessive focus on preventing risk. They added that if this “organizational drag” were reduced, the rate of revenue growth might double. Just 20% described their companies as “risk seeking.” Executives also reported that risk managers and auditors spend more than half their time on financial-reporting, legal, and compliance risks, even though the vast majority of big losses in market value occur because of mismanaged strategic risks. Most companies—91%—plan to reorganize or reprioritize risk management in the next three years and have already begun increasing budgets to that end.

We believe direct sellers should be proactive in identifying risk when it comes to distributor compliance. In our industry, just waiting for the field to tattletale on each other, or for illegal income claims to ‘show up’ in email, is certainly risky.”

To continue reading the full article from the Harvard Business Reviewclick here.

To learn more about compliance monitoring, read this white paper from Momentum Factor Founder & CEO Jonathan Gilliam.

And to find out how Momentum Factor can help protect your company through compliance monitoring with FieldWatch™, contact our team today.

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